A big bitcoin crash? Not even close

The price of bitcoin has fallen by about 40% since it peaked in mid-December, prompting many analysts to proclaim a “crash,” a “rout” or a “collapse.”

By stock-market standards, sure, those characterizations are correct. But by cryptocurrency standards, bitcoin is just being bitcoin. For a digital asset with a history of volatile price movements, the recent move downward doesn’t even rank in bitcoin’s top-five wildest swings.

Yahoo Finance calculated the 30-day change in the price of bitcoin every day since the summer of 2010. The numbers show that bitcoin’s largest downward price changes came in early 2014, with another period of steep losses in 2011. This chart shows the history:

Source: Yahoo Finance

We also ranked 30-day price changes from the biggest losses to the biggest gains. The largest 30-day decline of 2018 so far came on Jan. 17, when bitcoin was down 41% from a month earlier.

Sounds devastating. But that was only the 58th largest drop in bitcoin, on a 30-day basis. The biggest drop ever came on Feb. 20, 2014, when the bitcoin price was down 88% from a month earlier. On 15 different days in 2014, and 35 different days in 2011, price drops were bigger than anything we’ve seen so far this year.

We also looked at 1-day price changes and found a similar pattern. The biggest 1-day drop of 2018 came on Jan. 16, when the price fell 17% based largely on news out of China. That was only the 28th biggest single-day drop since 2010. The biggest single-day drop for bitcoin–like the biggest 30-day decline–came on Feb. 20, 2014, when it fell 57%. Four days later, bitcoin lost another 44%, for its second-biggest daily loss. If a bitcoin Armageddon ever seemed nigh, it was during that month, when the notorious Mt. Gox exchange was collapsing into bankruptcy, threatening the viability of bitcoin itself.

The price of bitcoin since it started trading in 2010. Source: Yahoo Finance

Bitcoin obviously survived, but it took more than three years to recover the losses of early 2014. From there, the price of bitcoin skyrocketed, then gave up some of the gains, which leaves us where we are today.

What’s different now, of course, is that bitcoin has grown from an obscure technical curiosity to a mainstream phenomenon that mom-and-pop investors are plowing into. Average daily trading volume so far in 2018 is 150 times what it was during the chaotic month of February 2014, and 21 times what it was during the same period just one year ago. Many bitcoin newbies just aren’t used to the dizzying price swings that come with the turf. But now they’re learning.